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28 Jun 2009

The curious case of Bernard Madoff has become a symbol for the moral lessons that people are trying to draw out of the recession, in fact it only reveals how esoteric the discussion about the economy has become. We've heard very little so far about the structural reasons behind the recession, but we've been flooded by an outpouring of moralistic 'observations' about greed and excess that are apparently behind the economic decline. The case of Madoff is being used to illustrate all the ills of unrestrained capitalism that put us in this position. All that it reveals in fact is how money has now acquired a mystical status that is divorced from any real economic analysis.

The case of Madoff does expose some of the failures of capitalism, but they have nothing to do with the popular and media perception of what the real problems are. The investors who lost their savings with Madoff, and bare in mind that many of those were large international institutions and banks and not only individual investors, revealed how little they knew about what their money was actually invested in. For conservative banks like HSBC to lose money with Madoff it must mean that all their 'safety checks' had some how failed. But this is not a result of malicious intent or unnecessary risk-taking, although it illustrates how the relationship between actual productive enterprise and generating value has been seriously compromised.

The investors with Madoff were looking for magic, somehow they convinced themselves that it is possible to generate serious returns on their investment through Madoff's talents. There is a serious abdication of responsibility here but more importantly an indication of a symptomatic problem: the correlation between productive economic activity and making money has been suspended in the minds of many to detrimental effect. Of course it is unfair to single out investors with Madoff when Western governments had been promoting this folly for many years now. Somehow, the Gordon Browns of the world had managed to convince themselves that in the 'New Economy' value could be generated through an economy that is disproportionately dependant on services and finance in particular.

When the media interviews Madoff's 'victims' they always reveal a common attitude that drew them to Madoff in the first place. They had been looking for the 'holy grail' of investments and Madoff's clever ploys convinced them that he possessed it. The aura of respectability and exclusivity must have enhanced Maddof's appeal, but the real problem is that those investors were already in the position of looking for this type of investment. To mistake that for greed would miss the point, who wouldn't like to make easy and lucrative returns on their money after all?

There is a much deeper problem that could explain not only Madoff's case but some of the wider problems in the economy: the mystification of money. Ponzi schemes are not a new thing, and people have always looked for magical returns on their investments. But for a Ponzi scheme to trick some of the largest institutions in the world and a multitude of regulators, there must be a deeper problem at work. The symptoms of mystification of money were already apparent after the dot com bubble burst at the end of the 90s, but very few people understood that problem in its proper context. The correlation between productive economic activity and generating value had been so severely eroded and compromised that the whole episode was treated as a passing problem instead of a symptom of a deeper crisis within Western economies.

It's not an exaggeration to say that the delusion still persists today. Many people are pinning their hopes on the recovery of the stock markets as if the market along can stand in for the wider economy. Stock markets are good indicators of the health of certain companies and sectors under normal conditions, but their value has been completely exaggerated and divorced from an understanding of other economic indicators and the productivity of the economy as a whole. Central banks and governments have reinforced these misleading trends with their over-reliance on monetary and financial measures to stimulate the economy, starting with the fiddling with interest rates through to bail-outs.

The lessons that should be learned from the Madoff affair is that money should be demystified, and the esoteric discussion about greed needs to be replaced with a discussion about the structural reasons for economic recession. Moral parables will not provide the adequate framework for understanding the real problems, only a cold analysis of the state of capitalism today could offer a solution.

26 Jun 2009

So Jacko's gone, and the eulogies begin. The media that has for so long fed off the 'king of pop' and his tumultuous life are now trying to milk one more story out of Michael Jackson. The BBC was quick to shift into tabloid mode, interviewing anyone that has ever caught a whiff of Michael Jackson or even saw his reflection in a water puddle. Even Gordon Brown, ever eager to shelter in other people's glow, has come up with one of his pathetic statements lamenting the loss of the mega-star that was Michael Jackson. Shameful stuff, it's time to leave the man along and let his family deal with what is after all a private tragedy.

There is one important lesson to be drawn our of Michael's bizarre life: eccentricity is not a crime. The media, shallow, populist and superficial, doggedly hounded Michael Jackson throughout his life, but sank to miserable lows when the allegations of abuse against him became public. In the most despicable example of trial by media, journalists used Michael's eccentricity to prove his guilt time after time, but they were ultimately defeated by the decision of a jury of his peers to clear him the last time around. God bless America and the right to trial by jury, not by a media that has forgotten a long time ago what the pursuit of truth means.

Michael Jackson took eccentricity to new levels, and he was certainly conscious of public attention. Yet, there is a difference between being eccentric and breaking the law. Michael's eccentricity was gloriously audacious, he treated his body as a moldable entity shunning decaying flesh for the sake of plastic longevity. That is part of his appeal, with each re-invention a new Michael emerged, the ultimate fulfillment of the desires of a ravenous fan-base. Bare in mind that Michael Jackson managed to survive decades in the music business, whereas many of his contemporaries dropped off the scene a long time ago. He did not live long enough to have yet another come back, but no doubt it would have been equally amazing for his fans.

Michael's eccentricity was part of his appeal, and the media savagely turned that against him but the public stood by him. Now as the fake tears and the insincere eulogies start, let us remember that the most important thing to take out of Michael's life is that eccentricity is not a crime.

16 Jun 2009

Let me begin with a salute to the Iranian people who have shown great courage against the Iranian regime's thugs and have managed so far to out-smart the Mullah brigades and continue their display of popular anger and discontent. This is no mean feat, Ahmadenejad's supporters will go to extreme lengths to suppress this budding uprising, and the protesters can only fight back with courage and determination. They genuinely deserve our support and solidarity.

As the world watches the escalating situation in Tehran with anticipation, many are speculating that this could be the end of the road for the Islamic Revolution in Iran. Only the Iranian people can determine the outcome of this struggle, and their will can certainly overcome the Basiji and the Revolutionary Guard. But let's put this in perspective, this is not an outright challenge to the system itself but a manifestation of the friction between the competing factions that have existed within the ranks of the rulers of the Islamic Republic since its foundation. Mir Hossein Mousavi, the candidate whom the demonstrators believe should have won the elections, was Prime Minister of Iran throughout its war with Iraq in the 80s. He's certainly not a critic of the Islamic Republic itself, he represents a different outlook among the ranks of the Iranian establishment that is opposed to Ahmadinejad and his backers.

The difference between the two men and what they represent embodies the tension that was inherent within the Islamic Revolution since its early days. Should the revolution be exported to other countries or should Iran focus on sorting out its own affairs? Nation state or revolutionary cause, what path should Iran follow? The question has never been settled conclusively, and the response to it has largely shaped Iran's foreign and domestic policy and continues to do so. Today however, the commitment to exporting the revolution is not an active project, but it remains an important rhetorical and ideological device that Ahmadinejad and his allies within the regime draw their legitimacy from. But despite his loud proclamations, Ahmadinejad is not the mad figure that is portrayed in the West. His noisy rhetoric is partially an attempt to mask his incompetence at managing the economy and running the country smoothly.

Against this background, it is easy to understand the appeal of Mousavi, a wealthy and successful man but also one who ran the economy efficiently during his term as prime minister. He represented something more immediate to Iranian voters than overthrowing the regime, namely competent management of the country and the economy and mild reformism. Having said that, no one can say for sure what direction public anger can take and if the crowds in Iran get a measure of their own power they might attempt to topple the system. There is a real barrier against this, the opposition to the Islamic Republic is not organised and any challenge to the system itself will draw the reformers closer to their opponents within the regime in order to protect the Islamic Republic from collapsing.

Western intervention at this stage, particularly by the Americans, will certainly not be in favour of the opposition that is taking shape day by day. The regime will portray the public demonstrators as agents of the West and galvanize support among the hardliners whose numbers run in the millions as well. What is important to realize at this stage is that this is a matter for the Iranian people to decide upon and they alone are responsible for determining the kind of society they want to live in.

It is easy to get carried away when watching millions protesting, but let's not turn this into a personal fantasy. The most likely outcome of this episode is that the regime will back down and appease the protesters one way or the other, and desktop revolutionaries everywhere will have their hearts broken with yet another 'spring' failing to induce real political change. Real change can only come through political organisation, let's get busy with that.

14 Jun 2009

Out of sheer Sunday boredom, I watched Benjamin Netanyahu deliver his much-hyped 'peace' speech live, and I must admit I was genuinely surprised. Netanyahu's people didn't manage to fill the room! For a speech that was expected to put the peace process back on track, the least they could have done is lure a few students into what was after all a small room. Never mind, everyone knew that Netanyahu was merely going through the motions of responding to Barack Obama's pressure without actually conceding anything, a tough exercise in semantics but hardly a gripping spectacle.

But on a serious note, many 'observers' had been filled with optimism now that Obama has decided to apply his magic touch to the thorny issue of the Palestinian question. We've been hearing this sort of talk from all sides of the conflict for a while now: only if America can be more of an 'honest broker', only if it applied friendly pressure on Israel, only if the international community took a tougher stance with Israel, and the rest of that cliche-laden litany, then compromises would be obtained and a two-state solution would magically materialise. Many people seem to think that all the elements of this two-state solution are quite obvious and it's only 'difficult' leaders on both sides that are preventing this from happening.

Wishful thinking, and careful what you wish for while we're at it. Remember what happened the last time America decided to solve the Palestinian issue by pressuring the leaders on both sides? Camp David, July 2000, Clinton gets tough and tries to negotiate a 'final status settlement' between the Israelis and the Palestinians only for the process to fail miserably leading to the third Intifada within the space of two decades and the bloodiest so far. The Palestinians are still suffering the consequences, and it had a big impact on Israeli politics as well. Arafat heroically resisted all the pressure to sign a peace deal that would have been seen as catastrophic by the Palestinian people.

But American policymakers don't seem to have learned the lesson of that episode. What didn't work with Arafat in 2000 will not work with Netanyahu today. Firstly, the 'solutions' that American technocrats have been coming up with are the result of abstract intellectual exercises that are far removed from the actual situation on the ground and do not take into consideration the political aspirations of either side. What may appear as a worthy compromise to someone sitting in an office in Washington means something entirely different to a Palestinian refugee. Secondly, the principle of active intervention itself assumes that the Americans know better than the Palestinians and the Israelis themselves what is in their best interest. But without the principle of self-determination the two parties will be locked in a relationship of dependence on America and the international community, which has in fact been put in place for a while now only to complicate the situation even further.

Any possible compromise and eventual solution would have to be accepted by both sides of the conflict and come as an expression of their aspirations, fully acknowledging that the power balance between them is extremely skewed in favour of Israel. In the wake of Zionism's demise, Israel is still searching for an alternative political project that could shape its future, but such a project remains elusive. Many Arab commentators and politicians misinterpreted Netanyahu's speech as standard Zionist rhetoric, but in reality it was an exercise in evasion and pragmatism. Crucially, Netanyahu did utter the words nobody thought he would ever say, and accepted a future Palestinian state, albeit with a number of caveats that would render it meaningless. This in no way shows Netanyahu's commitment to peace but it clearly illustrates that he and his chums on the 'right' do not have the political will-power to oppose the Americans on what should be a matter of principle and self-determination.

The Israeli obsession with 'security' clearly illustrates the lack of ideological commitment, and Netanyahu expressed that quite clearly by coming back again and again to this subject in his speech. But here is the contradiction at the heart of Zionism that has been magnified after its decline: from the Jewish perspective, Israel did not provide security for Jews everywhere but on the contrary has demanded that every Jew in the world should take an interest in defending it and become a potential citizen. The foundation of Israel in 1948 meant leaving the post-war stable and secure Europe and creating a new troubled state and acquiring a few million enemies in the process. From the Jewish security perspective, Israel did not make sense in 1948 and makes even less sense today. Zionism had overcome this problem historically by turning its attention to nation-building, but today there is little appetite for that among Israelis themselves and Jews everywhere else.

Netanyahu represents this dilemma, his generation grew up on those Zionist 'ideals' but now they find themselves in power and capable only of paying lip service to those ideals, while having no real political project. Pressuring them to make political concessions under those conditions is unwise, without a clear idea about the direction that Israel should take any concession will only muddle the issues and create even bigger problems. American pressure is attempting to relieve the Israelis of the responsibility for their future, but that could only lead to further instability.

The Americans have to realise that any solution to the conflict have to come from the parties involved. They have succeeded so far in making the Palestinians accept the principle of a two-state solution instead of their original demand for a secular state for Jews and Arabs, reducing their cause in the process from a progressive project of change to one of dealing with occupation. Hamas exploited this retreat to offer its own solution, and the Americans achieved the exact opposite of what they intended. Pressure on the Israelis for immediate concessions will also complicate the situation further, America certainly needs to re-examine its relationship with Israel, but the current urgency for a final settlement is misguided and may usher in yet another round of violence. History should not be ignored.

3 Jun 2009

On the 1st of March, the International Tribunal for Lebanon opened in The Hague, with the responsibility for prosecuting those responsible for the assassination of the former Prime Minister of Lebanon Rafik Al-Hariri. The Tribunal marks another milestone in the era of enhanced interventionism that began with the Dayton Agreement, for the first time an international criminal court will be responsible for trying a ‘terrorist’ crime against a specific person. Have the Lebanese traded sovereignty for justice in asking for this tribunal? Will we see the international community and the West in particular playing an increasingly interventionist role and using the instruments of international justice to bring about political ends? In what follows, I will describe the events that brought about the tribunal and argue that it a symptom of the general disorientation of contemporary politics in which sovereignty and self-determination have receded in favour of deterministic tendencies that stifle the political development of societies. Read more: http://www.karlsharro.co.uk/hariri.html